Global Organization Design

The way a company organizes itself—how it allocates responsibilities, how it organizes support services,
and how it groups products, brands, or services—can have a substantial impact on its effectiveness.
Global companies, however, find structure difficult.

Global companies find structure difficult because there are no simple solutions—most global structural
options create challenges as well as benefits. For example, many companies have focused for years on
standardizing structures; easily understood and navigated structures simplify costs and make sharing of
risk and information easier and therefore support many of the benefits of being global. However, global
companies are now often finding that they are reaching the limits of this benefit—their standardization
has become so thorough that they find it hard to achieve the flexibility needed to respond to local
market requirements.

Many are therefore starting to revisit the trade-off between standardization and local flexibility.

Another structural challenge faced by global companies is creating the right balance between minimizing
complexity (making it easy to get things done and get decisions made) and capturing knowledge and
innovation. It is often hard to get things done in a global organization due to its size and the multiple
time zones that it encompasses.

In addition, the inevitable duplication of some activities across businesses, regions, and functions
creates uncertainty about where to go to get a task completed or a question answered. One way to
solve this is to create self-contained, vertically integrated, global businesses within which decisions can
be made quickly and complexity is minimized. However, such silos make it much harder to find, share,
and benefit from knowledge across businesses. In our survey, for example, only 46 percent of senior
executives felt that ideas and knowledge were freely shared across divisions, functions, and geographies
within their companies.

For most global organizations, these trade-offs are greatly influenced by their archetype. For example,
the right answer to the trade-off between complexity and knowledge sharing for a customizer company,
which tailors its products and services to each market and which therefore needs to create a lot of local
innovation wherever it operates, is likely to be very different than it is for a global provider, which offers
standardized products.

Other issues may also affect these trade-offs. For example, the correct answer to the trade-off between
standardization and local flexibility may vary across markets even for the same business; there may be a
need for greater delegation in dynamic high-growth markets, where decisions need to be taken more
quickly, than in established developed markets. Likewise, the way in which a company has grown can
also be important. If, for example, a company has grown organically, it may have a high degree of
structural standardization; its biggest challenge may be deciding how to flex the model to allow more
local tailoring. If a company has grown inorganically, it may have the opposite problem: country or
business silos may operate relatively independently and be difficult to standardize globally.

Given the complexity of these issues, it is not surprising that many global companies end up creating
highly complex structures that incorporate multiple businesses within a matrix of business, functional,
and geographic structures. As one executive told us, “The overall matrix between geography, service
line, and global function in our company is, at best, cumbersome: this is no way to outperform local
competition in fast-moving markets.